Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

China Posts 9.5% Growth in '04

BEIJING -- China's economy expanded at its fastest pace in eight years in 2004, growing at an annual rate of 9.5 percent despite efforts to slow its blistering pace in order to avert inflation, the government said Tuesday.

The strong figure, exceeding expectations for an 8.6 percent expansion, led chief statistician Li Deshui to signal there would be no letup in the campaign to restrain growth.

"We will strengthen and improve macroeconomic controls and keep controls on credit and land," he said.

But any change to the currency policy would take time and he saw no immediate need to raise interest rates, he later said in an interview.

"Whether we need to raise interest rates will be based on the economic situation," he said in the interview. "But I can't see any need right now."

The growth figure compared with 9.1 percent in the year through the third quarter and indicated that China's economy was not heading for a sharp slowdown.

China has taken steps, including its first interest rate rise in nine years in October, to try to cool growth for fear heavy investment in key sectors could lead to overheating.

The country's growth rate has become a key issue for financial markets, which view the world's seventh-largest economy as a major driver of the global economy. Investors have worried that China, in slamming on the brakes, would curb demand for imported raw materials, machinery and components.

Gross domestic product for all of 2004 was 9.5 percent higher than a year earlier thanks in part to robust exports and agricultural production, the National Bureau of Statistics said.

That compared with growth of 9.1 percent in 2003 and was the strongest since 1996, when the economy grew 9.6 percent.

"What would economic growth have been like if we had not taken macroeconomic control measures last year?" said Li, head of the bureau.

"Maybe economic growth would have been much faster. Maybe we would have already seen serious inflation. Maybe we would have faced big ups and downs in the economy."

Analysts said the numbers could put pressure on Beijing to raise interest rates again after its 0.27 percentage point increase last year.

"We think without further rate hikes, the growth is at some risk. The big worry is that real interest rates are still too low," said Ben Simpfendorfer, a J.P. Morgan economist in Hong Kong.

Adjusting for seasonal patterns, Simpfendorfer calculated the economy had grown at a 12.9 percent annualized rate between the third and fourth quarters, accelerating "markedly" from the 8.4 percent rate it recorded between the second and third quarters.

The United States and others have pressed Beijing to allow its currency, the yuan, to move more freely, saying the current level of 8.28 to the dollar makes Chinese exports unfairly cheap.

A stronger exchange rate would also help restrain growth.

But Li said: "China doesn't have conditions to adjust the renminbi [yuan] exchange rate at present."

Li's comments caused the premium for one-year nondeliverable yuan forwards to narrow about 6 percentage points to 3,750 points on Tuesday, implying an exchange rate of 7.9 per dollar in 12 months' time. Analysts also cited it as a factor in trading of the dollar, yen and euro.

Some analysts think China may adjust its exchange rate in the second half of 2005, especially if consumer price inflation rebounds.

It fell to 2.4 percent in the year through December after hitting a seven-year high of 5.3 percent in the year to August.

(Reuters, AP)